Quiz
EC 101 Final Exam
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Questions in this quiz (122)
1Opportunity Cost is defined as [blank_start]what you give up for what you get[blank_end]
- Awhat you give up for what you get
2In Economics, a Positive Statement is defined as:
- AA statement that all is well with the economy
- BIs one which states that Demand is increasing with time
- CIs one which states that Supply is increasing with time
- DIs one which can be backed up with actual data
3In Economics, a Normative statement is one which:
- AIssued by the President
- BApproved by Congress
- CDescribes what economic policy should be
- DA method of federal debt reduction can be achieved
4Land, Labor, Capital and Entrepreneurship are:
- AThe basis of Opportunity Cost
- BThe factors of Production
- CThe factors of scarcity
- DNone of the above
5Opportunity Cost occurs because:
- AResources are scarce
- BResources have alternate uses
- CWe must choose how to use our scarce resources
- DAll of the above
6Economics focuses on:
- AMoney
- BBanks
- CLaissez Faire government
- DPeople and how resources are used to satisfy human wants
7A Production Possibilities Curve describes:
- AThe maximum output of military goods (guns)
- BThe maximum output of consumer goods (butter)
- CThe maximum output of the economy (guns + butter)
- DThe effect of inflation and unemployment on the economy
8Ceteris Paribus is
- AThe assumption that every variable is changing simultaneously
- BThe assumption that all but one variable remain unchanged
- CLatin for "In God we trust"
- DFailure of Laissez Faire form of government
9A government without regulatory restrictions of business has a Laissez Faire approach to governing
- ATrue
- BFalse
10Central government planning of an economy was practiced by:
- AFrance and Germany
- BThe United States and Canada
- CRussia and China
- DBrazil and Mexico
11A demand for goods only exists if someone is [blank_start]willing[blank_end] & [blank_start]able[blank_end] to pay for the good
- Awilling
- Bable
12Demand is an expression of consumer buying intentions, of a willingness to buy, not a statement of actual purchases. How much we actually buy of any good will depend on its [blank_start]price[blank_end].
- Aprice
13The Demand curve for a product is the [blank_start]sum[blank_end] of the individual demand curves
- Asum
14A demand curve shows how the quantity demanded changes in response to a change in price. Which three (3) of the following will cause the demand curve to shift to the RIGHT:
- AThe stock market drops precipitously in anticipation of a recession
- BMiddle class income unexpectedly dramatically increases
- CA shortage of the good described by the demand curve is revealed
- DThe extremely good health effect of the product is revealed to the public
- EThe product which the demand curve represents is shown to be defective
15A demand curve shows how the quantity demanded changes in response to a change in price. Which two (2) of the following will cause the demand curve to shift to the LEFT:
- AThe stock market drops precipitously in anticipation of a recession
- BMiddle class income unexpectedly dramatically increases
- CA shortage of the good described by the demand curve is revealed
- DThe extremely good health effect of the product is revealed to the public
- EThe product which the demand curve represents is shown to be defective
16The Equilibrium Point determined by the demand & supply curves is that price:
- AMost people are willing to pay for the product
- BAt which most suppliers wish to sell their product
- CAt which buyers and sellers are both willing and able to purchase and sell a product
- DAt which major retailers need to sell their product in order to make a profit
17Marginal Utility is the satisfaction obtained by consuming one additional (marginal) unit of a good. The law of diminishing marginal utility states that the marginal utility of a good [blank_start]diminishes[blank_end] as more of it is consumed in a given time period.
- Adiminishes
18Notwithstanding the law of marginal utility, the Total Utility of the good being consumed will [blank_start]grow[blank_end] as more of it is consumed in a given time period.
- Agrow
19In simple words, Elasticity is defined as:
- AThe change of Quantity divided by the change in Price
- BThe slope of the Demand Curve at Equilibrium
- CThe percent change in Quantity divided by the percent change in Price
- DAll of the above
20American Airlines (AA) determines that its New York to Chicago flights average 100 passengers on an airplane which seats 120 people. Tickets for those 100 passengers are sold well in advance at a price of $200. AA finds that it has an Elasticity equal to 2 at this price and quantity point. If AA drops its price by 10 percent for the remaining tickets, how much of a percentage increase in quantity can AA expect?
- A5 percent
- B10 percent
- C15 percent
- D20 percent
21Based on your answer to question 20, how many additional tickets did AA sell? [blank_start]20[blank_end]
- A20
22In studying the Demand curve for a good such as very fine cotton shirts, we find that an increase in the sales of these shirts will cause an [blank_start]increase[blank_end] in complementary goods such as pearl buttons and an [blank_start]decrease[blank_end] in substitute goods such as inexpensive polyester dress shirts.
- Aincrease
- Bdecrease
- Cincrease
- Ddecrease
23When Susan shops for clothing at Macy's with a budget of $50.00, she sees a fine blouse costing $50.00 and a fine skirt costing $50.00. Susan decides to purchase the blouse. What was the opportunity cost of the skirt she did not purchase? $[blank_start]50[blank_end]
- A50
24We know that demand is a function of:
- AConsumer taste
- BStatus
- CNecessity
- DGender
- EIncome
- FThe number of consumers in the market
- GAll of the above
25Under normal economic conditions, consumers purchase goods they consider to be normal goods but under poor economic conditions they tend to purchase goods which are known as [blank_start]inferior[blank_end] goods.
- Ainferior
26When people work to produce goods they are part of [blank_start]factor[blank_end] markets.
- Afactor
27When people purchase goods they are a part of [blank_start]product[blank_end] markets.
- Aproduct
28At the equilibrium point found at the intersection of the Demand and Supply curves, there is a compromise between Buyers and Sellers.
- ATrue
- BFalse
29Price Floors located below the equilibrium point:
- ACause a shortage in Supply
- BCause a Surplus in Supply
- CIncrease Demand
- DDecrease Demand
- EHave no effect
30Price Floors located above the equilibrium point:
- ACause a shortage in Supply
- BCause a Surplus in Supply
- CIncrease Demand
- DDecrease Demand
- EHave no effect
31Price Ceilings located below the equilibrium point:
- ACause a shortage in Supply
- BCause a Surplus in Supply
- CIncrease Demand
- DDecrease Demand
- EHave no effect
32Price Ceilings located above the equilibrium point:
- ACause a shortage in Supply
- BCause a Surplus in Supply
- CIncrease Demand
- DDecrease Demand
- EHave no effect
33The total cost of producing a good is the sum of the Producer's:
- AOverhead and Maintenance costs
- BFixed and Variable costs
- CProduction and income tax costs
- DAll of the above
34The Marginal Unit Cost of producing a good is equal to the change in [blank_start]total[blank_end] cost divided by the change in total [blank_start]quantity[blank_end].
- Atotal
- Bquantity
35While we can determine the accounting costs of production in the short run, there are sometimes economic costs which do not appear on an accounting of cost. In order to properly account for economic cost we must utilize the equation:
Economic Cost = (________________) Cost + (________________) Cost- AFixed, Variable
- BSocial, Unintended
- CExplicit, Implicit
- DNone of the above
36Output per employee tends to [blank_start]diminish[blank_end] as more labor is added to the production process.
- Aincrease
- Bdiminish
37The Average Total Cost Curve is U shaped because:
- AVariable Costs become very high due to the Diminishing Utility of workers
- BFixed Costs no longer remain fixed at high production rates
- CInflation causes unreasonable increases in production costs
- DObama Care causes fixed costs to increase with increases in production
38The production decision is the short run choice of how much output to produce with existing facilities. A producer will be willing to supply output only if price at least covers marginal cost.
- ATrue
- BFalse
39In Perfect Competition, if the price of a product drops, the quantity produced will always ________________ and if the price of a product increases, the quantity produced will always ________________
- Aincrease, decrease
- Bdecrease, increase
- Cdecrease, decrease
- Dincrease, increase
40In perfect competition, where individual firms have no pricing power, the quantity of a product at which the maximization of profit occurs, is determined by the intersection of the:
- ADemand & Supply Curves
- BMarginal Cost and Supply Curves
- CMarginal Cost Curve and the Price Line
- DAll of the above
41The profit-maximizing producer in perfect competition never seeks to produce at that point where quantity produced yields the minimum average total cost, but at that point where:
- AMarginal Cost is zero
- BAverage total cost equals price
- CMarginal cost equals price
- DAll of the above
42Even in Perfect Competition, the entry of too many competitors will cause price to decrease and as a result the demand curve will:
- AMove to the left
- BMove to the right
- CNot move at all
- DBecome irrelevant
43In perfect competition, new competitors wish to enter the field when:
- AEntry barriers are low and profits are high
- BEntry barriers are high and profits modest
- CEntry barriers and price are low
- DGovernment regulation of the product is stringent
- EGovernment regulation is almost non-existent
44In both monopoly and perfect competition, every producer of goods must strive to:
- AMinimize fixed and variable costs
- BMaximize output quantity to gain maximum revenue
- CMaximize profits
- DRaise prices
- EReduce prices
45Marginal Cost is defined as:
- AChange in Total Cost divided by change in total quantity
- BThe additional cost incurred to produce one additional unit of goods
- CThe basis by which quantity of production is limited by price for maximum profits
- DAll of the above
46In Monopoly, the demand curve facing the firm and the market demand curve are:
- ASimilar
- BIdentical
- CDifferent
- DIrrelevant
47In perfect competition, we determine the amount of goods to be produced in order to achieve maximum profits are:
- AThe quantity of goods found at the intersection of the average total cost and price curves
- BThe quantity of goods found at the intersection of the marginal cost and price curves
- CThe quantity of goods found at the intersection of the demand and supply curves
- DAll of the above
48In perfect competition, the price at which a product is sold is determined by:
- AThe price listed by the market's largest competitor
- BThe market supply curve
- CThe market demand curve
- DGovernment intervention
49In monopoly:
- AThe monopoly is the market & sets the price for the product at any price it desires
- BThe monopoly wishes to set price by determining that quantity of production and pricing where profits are maximized
- CThe monopoly wishes to set price by determining that quantity of production and pricing where revenues are maximized
- DThe monopoly wishes to set price by determining that quantity of production and pricing where the costs of production are minimized
50In order to maximize profits, the monopoly will attempt to determine that quantity of produced goods wherein:
- AMarginal cost equals price
- BMarginal cost equals average total cost
- CMarginal cost is minimized
- DMarginal cost equals marginal revenue
51Monopolies will attempt to maintain their industrial dominance through:
- ASetting high barriers to entry for the production of their product
- BPatent protection and exclusive licensing of production by others
- CLegal harassment
- DLobbying the government for regulations protecting their product from competition
- EAll of the above
52In perfect competition, the demand curve facing each firm is:
- AVertical
- BHorizontal
- CDownward sloping
- DDifferent for each firm
53In the short run, suppliers are constrained from major adjustments in both fixed and variable costs. However, in the long run:
- AFixed costs can be changed
- BVariable costs can be changed
- CAll production constraints can be changed
- DAll of the above
- ENone of the above
54A worker's productivity (MPP) depends in part on the amount of other resources in the production process
- ATrue
- BFalse
55The relative scarcity of other inputs (capital and labor) constrains the marginal physical product (MPP)
- ATrue
- BFalse
56Consider the following table for demand and supply.
At what quantity does equilibrium occur? [blank_start]45[blank_end]
What is the equilibrium price? [blank_start]$17[blank_end]
What is the manufacturer's revenue at equilibrium? [blank_start]$765[blank_end]
If the cost to manufacture one item at the equilibrium price is $12, then what is the total cost of manufacture at the equilibrium? [blank_start]$540[blank_end]
Based on the foregoing, what is the profit? [blank_start]$225[blank_end]
What is the profit when the cost is equal to $17? [blank_start]$0[blank_end]
- A45
- B$17
- C$765
- D$540
- E$225
- F$0
57The nature of Public Goods is that while such goods are meant for the use of the entire public and are supposed to be financed by the entire public, failure occurs due to:
- APresident Obama's social programs
- BFree loaders
- CLow interest rates set by the Federal Reserve
- DThe Republican majority in Congress
58Externalities refer to those costs which are found to augment economic costs and are either a positive or negative cost because they either provide positive or negative benefits to society. We try to determine these externalities through the relationship:
Social Demand = ([blank_start]Market Demand[blank_end]) + ([blank_start]Externalities[blank_end])- AMarket Demand
- BExternalities
59Market Power is a direct consequence of a monopoly, duopoly or a very small ground (oligopoly) of competitors which serve to control almost all of the determinants of the market. The power of these firms was marginalized over time by:
- AThe Sherman Act
- BThe Clayton Act
- CThe creation of the Federal Trade Commission (FTC)
- DAll of the above
60When the government sees inequity in the marketplace, it may:
- AEncourage industrial growth in areas deemed beneficial to the populace
- BCause the Federal Trade Commission to cease regulation of the industry
- CRequire the Federal Reserve to raise interest rates to fight inflation
- DAll of the above
61Political considerations in the federal government may:
- AMarginalize well intended legislation for industrial regulation
- BCause some industries to be unregulated (self regulation)
- CIncrease regulation of industries for the benefit of others
- DAll of the above
62Nominal GDP is the value of output measured in:
- APrice relative to the year 2000
- BCurrent prices
- CThe cost of a traditional market basket of goods
- DThe cost of living in the year 2008
63Real GDP is the inflation adjusted measure of total output:
- ATerms of the cost of living in the year 2000
- BPrices relative to the year 2008
- CConstant prices
- DEuros
64While Real GDP per capita is the measure of
- AThe number and financing of social programs in a country
- BThe quality of a public school education in a country
- CThe quality and sophistication of the infrastructure in a country
- DAll of the above
65GDP consists of:
- AConsumption
- BInvestment
- CGovernment purchases
- DNet exports
- EAll of the above
- FNone of the above
66Durable goods are items such as:
- AGasoline
- BWashers and Dryers
- CDonuts
- DPizza
67Non-Durable goods are (3 correct answers):
- AGasoline
- BWashers and Dryers
- CDonuts
- DPizza
- ESnow blowers
68Consumption is approximately [blank_start]70[blank_end] percent of GDP.
- A70
69Inflation is the [blank_start]increase[blank_end] in the cost of living.
- Aincrease
- Bdecrease
70Progressive tax rates:
- ARise with increasing income
- BFall with increasing income
- CRemain constant for all income levels
- DAre a function of Laissez Faire government
71Global poverty has its roots in:
- ALack of adequate public education in a country
- BLack of natural resources in a country
- CA country's social barriers (class distinctions)
- DLack of the rule of law for all economic classes of individuals
- EAll of the above
72Income transfers are:
- ASocial Security
- B26 weeks of unemployment compensation
- CMedicare
- DAll of the above
- ENone of the above
73Two consecutive quarters of negative Real GDP is defined as:
- AInflation/deflation
- BRecession
- CDepression
- DAll of the above
74Nominal GDP can rise when Real GDP decreases.
- ATrue
- BFalse
75Examples of business investment are referred to in GDP calculations are:
- AComputers utilized to increase worker efficiency
- BThe purchase of private homes
- CBusiness inventory
- DAll of the above
76The Great Depression of 1929 gave rise to:
- AThe Federal Reserve
- BThe FDIC
- CScience of Macroeconomics
- DIncreased production of apples for beggars
77Aggregate Demand consists of:
- AConsumption
- BInvestment
- CGovernment spending
- DNet Exports
- EAll of the above
78The "market basket of goods" utilized in the CPI computation is the result of research by:
- AThe Federal Reserve
- BThe Commerce Department
- CThe Bureau of Labor Statistics
- DThe Environmental Protection Agency
79When computing the Cost of Living Index (CPI), we hold _______________ constant relative to the base year.
- ANeither Price nor Quantity
- BPrice
- CBoth Price and Quantity
- DQuantity
80When computing Real GDP, we hold _______________ constant relative to the base year.
- ANeither Price nor Quantity
- BPrice
- CBoth Price and Quantity
- DQuantity
81When the economy is at full production, we wish to achieve stability for the economy by (2 correct answers):
- AHolding inflation at zero
- BHolding inflation at approximately 3%
- CHolding unemployment below 1%
- DHolding unemployment at approximately 5%
82In the year 2008, Nominal GDP _______________ while Real GDP _______________
- Aincreased, increased
- Bincreased, decreased
- Cdecreased, decreased
- Ddecreased, increased
83In both perfect and monopolistic competition, all business entities wish to:
- AOperate at a point where demand equals supply
- BOperate in such a manner as to maximize profits
- COperate at the point where marginal cost equals average cost
- DOperate at that point where price equals average total cost
84Opportunity cost occurs because:
- AResources are scarce
- BResources have alternate uses
- CWe must choose how to utilize our scarce resources
- DAll of the above
85Profit maximizing firms will hire workers only if there is an immediate need due to increased product demand or the firm anticipates such a need in the short term. This type of labor is:
- AShort term labor demand
- BDerived labor demand
- CQuantity labor demand
- DLow wage labor demand
86The intersection of market supply and demand for wages, determines the equilibrium wage in a competitive labor market. Therefore:
All of the firms in the industry can then hire as much labor as they want at that equilibrium wage.- ATrue
- BFalse
87Likewise, anyone who is willing and able to work for the equilibrium wage will be able to find a job.
- ATrue
- BFalse
88Market failure implies that the forces of supply & demand have not led us to the best point on the production possibilities curve.
- ATrue
- BFalse
89In Public Goods, we utilize the free rider theory as a basis for exacting tolls on major highways.
- ATrue
- BFalse
90To represent the social demand for cars, we must subtract external costs from the private benefits.
- ATrue
- BFalse
91Question 91 means: External Costs = Social Costs - Private Costs
- ATrue
- BFalse
92Market power is the ability to alter the market price of a good or service
- ATrue
- BFalse
93The Consumer Confidence Index compiled by the University of Michigan is a gauge of:
- AThe economic outlook of the populace
- BAn indicator of consumer demand
- CThe confidence the public has in economic conditions
- DAll of the above
94The majority of the economy is supported by:
- AExports to foreign countries
- BGovernment expenditures
- CInvestment
- DConsumption
95Purchases of housing by the civilian population is counted as:
- AConsumption
- BInvestment
- CInventory
- DAll of the above
96When the equilibrium point between aggregate demand and aggregate supply is attained in the economy:
- AInflation is always below 3%
- BUnemployment is always between 4% and 6%
- CThe economy is always operating on the Production Possibilities Curve
- DAll of the above
- ENone of the above
97We always have an equilibrium point. Where it falls determines whether or not the economy is operating in a satisfactory manner.
- ATrue
- BFalse
98For the economy to function properly, it is the job of the federal government through taxation, government expenditures and Federal Reserve actions to achieve that goal.
- ATrue
- BFalse
99President Obama's stimulus program utilized government expenditures, income transfers and tax relief to aid the economy.
- ATrue
- BFalse
100The Multiplier Effect of positive government stimulus programs is derived from the propensity of the work force to spend and save:
- ATheir entire paychecks
- BTheir increased disposable income
- CTheir available credit card monies
- DTheir 401k retirement funds
- EAll of the above
101The Marginal Propensity to Spend (MPS) is that fraction of each marginal dollar:
- AOf new disposable income spent on boats & scuba gear
- BOf new disposable income spent on restaurants & theater
- COf new disposable income spent on a new truck & camping gear
- DAll of the above
102The Multiplier Effect equals 1/(1-MPC). If the MPC is 0.50, the Multiplier is:
- A4
- B2
- C1
- D5
103Based on your answer to question 102, if the government stimulates the economy injecting $1 Billion, the multiplier effect will equal:
- A$4 Billion
- B$2 Billion
- C$1 Billion
- D$5 Billion
104The policy goal of the government is to match aggregate demand with the full employment potential of the economy. The fiscal strategy for attaining that goal is to shift the aggregate demand curve such that:
- AThe equilibrium point occurs at an inflation rate of 3%
- BThe equilibrium point occurs at an unemployment rate between 4% and 6%
- CThe equilibrium point occurs on the production possibilities curve
- DAll of the above
105Keep in mind that the use of the budget to manage the economy implies that:
- AThe budget will always be balanced
- BThe budget will never be balanced
- CThe budget may or may not be balanced depending on the economy
- DNone of the above
106Money serves the following purposes:
- AMedium of exchange for goods and services
- BStore value such as savings
- CStandard of value for determining the worth of goods and services
- DAll of the above
107A checking account is a transactions account
- ATrue
- BFalse
108Commodity money is used to purchase futures on the Chicago Commodity Exchange
- ATrue
- BFalse
109Fiat money is (2 correct answers):
- AMoney used to purchase Fiat automobiles
- BMoney without intrinsic value
- CIssued by the Federal Reserve
- DOnly utilized to purchase one dollar's worth of gold at the Federal Reserve
110Cash is only one part of M1 money
- ATrue
- BFalse
111Because credit card balances must be paid by check, credit card credit limits are:
- ATransaction accounts
- BExcluded from M1 money
- CCommodity money
- DAll of the above
- ENone of the above
112The Reserve Ratio for banks which is set by the Federal Reserve:
- ALimits the amount of deposits a bank may accept
- BSets the minimum percentage of its deposits a bank must hold in reserve
- CIs a limit on the maximum interest a bank may charge for loans
- DHas no effect on small neighborhood banks
113The maximum amount of money in the economy resulting from fractional banking is equal to a bank's total deposits multiplied by:
- AThe Reserve Ratio (RR)
- BThe reciprocal of the Reserve Ratio (1/RR)
- C1 divided by (1-RR)
- DNone of the above
114While there are 12 regional Federal Reserve Banks, national Federal Reserve Policy is set by the chairman of the Federal Reserve and:
- AThe House of Representatives
- BThe Senate
- CThe 7 Fed governors on the national Fed Board
- DThe President
- EThe Secretary of the Treasury
115The Federal Reserve determines:
- AThe amount of money in the banking system
- BThe banking system's reserve requirements
- CThe interest rate banks pay to the Fed for loans
- DAll of the above
116Private banks hold most of their required reserves in accounts at the Federal Reserve.
- ATrue
- BFalse
117The Federal Reserve is a clearing house for checks written by individuals and businesses having accounts at various banks.
- ATrue
- BFalse
118Based on the foregoing statement, the effect of an INCREASE in the reserve requirement for a bank holding more reserves than required by the reserve ratio is:
- AA decrease in available lending capacity
- BAn increase in available lending capacity
119Based on the statement in question 118:
- AA decrease in the Multiplier for banking system loans
- BAn increase in the Multiplier for banking system loans
120The Discount Rate is the interest charged by the Fed to those banks which borrow from the Fed
- ATrue
- BFalse
121The Interest Rate banks charge each other for interbank loans is known as the:
- APrime Rate
- BDiscount Rate
- CFederal Funds Rate
- DNone of the above
122One Open Market operation of the Fed is the sale or purchase of United States Bonds.
- ATrue
- BFalse
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- Quiz on EC 101 Final Exam, created by Audrey Bowen on 05/05/2017.
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- Audrey Bowen
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